Cropland leases: what producers need to know

Quality leases ensure the stability of the landlord-tenant relationship and the long-term farm profitability of the farm operation, by clearly describing the responsibilities and expectations of each party to the agreement.

Grant Ballard | Sep 10, 2012

Attorneys who work in the area of agriculture and agricultural law regularly are asked about cropland and farm leases. In today’s world, producers realize that lease terms and misunderstandings about the provisions in lease agreements can be costly and may even result in the complete breakdown of the landlord-producer relationship.

While farmers are coming to the conclusion that written leases are necessary, too many written leases are incomplete, poorly drafted, or unfair to one of the parties to the lease. This does not have to be the case. Cropland leases can be constructed so that they are fair to both the producer and the landlord. Quality leases ensure the stability of the landlord-tenant relationship and the long-term farm profitability of the farm operation, by clearly describing the responsibilities and expectations of each party to the agreement.

This short article is not intended to provide legal advice or cover all of the legal issues that relate to cropland leasing. Nevertheless, it highlights some of the issues to which producers should give serious attention and consideration. When you consider your farm leases, give attention to the following issues.

• Dates and signatures: A lease should be written and provide both the beginning and ending dates for the term of the lease. The lease should be signed and dated by both parties.

• Property description:A lease should contain a legal description of the real property and reference all buildings and improvements to be leased by the farm operator.

• Termination clause: Both parties should understand and agree to the circumstances which may end the lease. Farmers should also insist the lease expressly state that they be given written notice of default along with a specified time period in which to respond to the landlord’s notice of grounds for termination. Producers might also consider providing themselves an opportunity to cure the default, within the written terms of the lease.

• Terms of rental:A lease should describe with specificity the rental agreement, including whether the lease is a cash lease or a crop-share agreement. The time at which payment is due should be specified, as well.

• Maintenance of property:A lease should expressly state the responsibilities of both the landlord and the tenant in regard to the maintenance and repair of the leased property, as well as any improvements on the premises. Often a cropland lease will involve the maintenance of soil fertility and the control of noxious weeds. It is wise to address these issues in detail. A good farm lease will also address the possibility of reimbursement or the discounting of rent, where the producer is forced to spend a large or unanticipated amount of money in the maintenance or repair of the landlord’s property or improvements.

• Liability issues: A cropland lease should not unfairly apportion liability to the producer. In addition, the lease should require that insurance is carried on the property, and the lease should assign the responsibility to obtain and maintain coverage to one of the parties to the agreement.

• Federal farm programs:A farm lease that involves cropland should also address federal farm programs, especially whether the landlord or the farmer has the authority to make determinations as to farm program and conservation program participation.

• Arbitration provisions:Producers should understand that, by signing a lease agreement which includes an arbitration clause, they are limiting their right to use the Court system to protect their interests. Arbitration proceedings are, for all practical purposes, final. Producers should also be aware that arbitrators are not judges and may have no legal experience or an adequate understanding of the legal issues presented by a cropland lease dispute. Producers should give significant thought to the consequences of an arbitration clause before signing a lease that mandates the arbitration of disputes between the landlord and farmer.

This article has highlighted some of the basic issues that should be addressed in a cropland lease. It is always a good idea to have an attorney draft and review a cropland lease prior to entering into the lease agreement. A quality farm lease that fairly addresses the above-mentioned legal issues may very well assist a producer in avoiding unneeded controversy and result in a longstanding and profitable relationship between the producer and landlord.

Grant Ballard is an associate with the Banks Law Firm, PLLC in Little Rock, Arkansas. He can be contacted via email at [email protected][2].